Hedge Clippings is in part concerned, and in part excited by the fact that after today there are only two more Fridays before Christmas. On the one hand there seems an awful lot to do in a short space of time, while on the other a welcome break beckons. Maybe even a chance return of a good old-fashioned Friday lunch, which sadly (or gladly) are not as frequent as they once were.

We are however looking forward to 2015 and all it has to offer, and take this opportunity of giving you a heads up regarding an event we have scheduled in Sydney at midday on Thursday the 12^th of February in conjunction with Deloitte to kick the new year off. The theme will be "Looking Forward, Looking Back" and will feature an expert panel of fund managers, each covering different strategies and geographies, who will provide the audience with their collective wisdom on the economic and market outlook for 2015.

If you want to register your interest in receiving an invitation to the event please click here.

Others who might be looking forward to a welcome break will no doubt include the Prime Minister and his Treasurer, both of whom have endured what could be best described as a 'difficult year', or at least a particularly difficult six or seven months since the budget was announced last May. The fact that there seem to be so many issues still open to resolution in the Senate will not only be causing the government some headaches over the holidays, but will also have some negative effect on consumer confidence, and the very economy the Treasurer is trying to manage.

With the potential, and in some quarters expectations, of a further cut by the RBA to interest rates, there is a strong indication that the economy is not the greatest of shapes. Certainly the commodities boom, while possibly not bust, is not what it was, and only the largest and lowest cost iron ore producers are likely to be operating profitably. None of this is helping the Aussie dollar, but Hedge Clippings has felt for some time that it has been stubbornly overpriced, with probably some further room to fall. No doubt that prediction will be enough to kick some life back into it!

Prior to that David Murray will finally announce the findings of his Financial System Inquiry. All will be revealed this Sunday (you can register for access to the report here), with significant expectations that the Inquiry's recommendations will be wide ranging, and in some cases controversial. As we've mentioned before, previous inquiries such as the Henry Tax Review, and Mark Johnson's 2009 report on the financial sector created plenty of stir, but not much action once the politicians of the day had finished with them.

And on that note, enjoy the weekend, and if you have nothing better to do on Sunday than download the FSI report, Happy Reading!

Specific results received this week include the following PERFORMANCE UPDATES:

It's early days for November results, but those received so far include the Bennelong Long Short Equity Market Neutral Fund, which bounced back with a return of 3.12%, whilst the Bennelong Alpha 200 Fund returned 5.08%.

Supervised High Yield Fund returned 0.41% during October and 6.50% over the prior 12 months with a volatility of 0.74%.

FUND REVIEWS released this week, all with the potential for earning CPD points:

Alpha Beta Asian Fund; Optimal Australia Absolute Trust; Totus Alpha Fund

Best wishes for a happy and healthy weekend,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy.  For more information visit www.cpresearch.org.au or contact me by email.

BENNELONG LONG SHORT EQUITY FUND

Attached is our most recently updated  Fund Review on the Bennelong Long Short Equity Fund.

CPD Points are now available for all AFM Fund Reviews. Read the review and answer 5 questions to earn half a point toward your continuing professional development.

• The Fund is a research driven, market and sector neutral, "pairs" trading strategy investing primarily in large cap stocks from the ASX/S&P100 Index, and has produced an annualised return of 16.96% against the broader ASX200 Accumulation return of 8.33%.
• The consistent returns across the investment history indicates the Fund's ability to provide positive returns in volatile and negative markets and significantly outperform the broader market.
• Fund performance was muted for the month as the market drifted without any strong thematic and investors were subject to merger and acquisition activity/speculation, yield/defensive buying and stock specific issues. Our assessment is that the April factors that negatively impacted fund returns, which were of a more global nature, were persisting early in the period but since have abated. Fund activity was limited in May as our view of market fundamentals have not really changed.

Sean Webster
Research and Database Manager
Australian Fund Monitors

ATTACHED FILESBennelong Long Short Equity Fund AFM Review - Oct 2014 (pdf format)

ALPHA BETA ASIAN FUND

ATTACHED FILESAlpha Beta Asian Fund AFM Fund Review Oct 2014 (pdf format)

OPTIMAL AUSTRALIA ABSOLUTE TRUST

AFM have released the most recently updated Fund Review on the Optimal Australia Absolute Trust.

CPD Points are now available for all AFM Fund Reviews. Read the review and answer 5 questions to earn half a point toward your continuing professional development.

We would like to highlight the following:

• Optimal Australia is a specialist Australian equity investment manager and the Fund has a long/short equity strategy typically with a low but variable net market exposure comprising 40 to 65 stocks broadly selected from within the ASX200.
• The Fund's approach to risk is shown by the Sharpe ratio of 1.72, Sortino ratio of 4.87, both of which are well above the ASX 200 Acc Index, and volatility of 3.44%. The Fund has also recorded 84% positive months.
• The investment team comprising George Colman, Peter Whiting supported by Stephen Nicholls and Justin Hay have over 100 years combined experience in equity markets.

For further details on the Fund, please do not hesitate to contact us.

Sean Webster
Research and Database Manager
Australian Fund Monitors

ATTACHED FILESOptimal Australia Absolute Trust AFM Fund Review Oct 2014 (pdf format)

• Totus Capital is a Sydney based long short fund manager established in 2012 by Ben McGarry which aims to place equal emphasis on performance and capital preservation.  The Fund invests mainly in Australia, but also in other developed economies, with a primary exposure to equity markets.
• The Totus Alpha Fund?s investment strategy is to identify structural themes, and then seek to drive performance by investing in securities that have concentrated exposure to those themes.  Single stock short positions are used to generate alpha, frequently in under researched parts of the market such as the small and mid-cap space. Index derivatives are used to hedge the portfolio?s market risk.
• McGarry qualified as a Chartered Accountant with PWC in 1999 and has 14 years market experience, commencing his career covering European building materials and construction sectors at Morgan Stanley in London. Previous experience included analytical roles at Ausbil, a Sydney based $10bn+ long-only manager, and sell side emerging companies experience at UBS. McGarry?s emerging company research with UBS included exposure to a range of sectors including energy, materials, industrials, tech, financials, retail and telecommunications.
• The Fund has delivered an annalised return of 25.89% since inception in March 2012 as compared to 14.71% for the ASX 200 Accumulation Index. The standard deviation has been higher than the Index at 13.23% as compared to 11.11% and the Sharpe ratio is 1.60.  

ATTACHED FILESTotus Alpha Fund AFM Review Oct 2014 (pdf format)

Potential is one thing, reality is a greater challenge.

A recent research report by ANZ Bank [entitled "Caged Tiger: the Transformation of the Asian Financial System"] forecast that Asia's share of the global economy will move from 25% currently to 35% in 2030, and then to 50% by 2050.

ANZ's report noted that with the exception of Japan and the newly industrialised economies, Asia's rapid industrialisation of the past 2 decades has not been matched by an extensive development of its financial system. Many Asian countries have relatively closed and highly regulated financial systems, with a dominant banking sector and heavily managed exchange rates.

But in order to move to the next stage of development the financial systems of many Asian economies must be reformed, opened and become less regulated.

The development of the financial system is one part of what is need to move these economies through middle income levels, with other factors including other economic reforms and improved legal structures.

Policy responses to the Asian Crisis in 1997 led to the situation whereby countries built up large foreign exchange reserves, with this surplus recycled back into the international system through the purchase of government bonds. However as these countries liberalise their financial systems they will play a much bigger role in allocating Asian savings to a far broader set of markets and investments.

ANZ modelling estimated that Asian bond markets will grow seven times over the next 15 years, and the capitalisation of equity markets will move from $9 trillion to almost $55 trillion by 2030.

Turning to Australia, in 2010 around 2.5% of China's total foreign investment was invested in Australia. Even if that percentage remains unchanged, the total level of Chinese investment into Australia could reach over A$200 billion, or according to ANZ's estimate, about 15% of Australia's forecast GDP by 2030.

Where are we headed with all this?

In the financial services and fund management sector, currently less than 20% of Australia's funds under management is sourced from offshore. This will continue to grow as Asia's transformation progresses, with Sydney likely to be the largest beneficiary. However it is not clear if the benefits to all capital market activities will flow equally, with debt, trade finance and insurance likely to face competition from other Asian financial centres such as Singapore and Hong Kong, and no doubt Shanghai at some stage in the future.

The point is that in spite of the opportunities facing Australia's banking and financial sector, it must be remembered that opportunity and reality are often significantly different. Australia has a wealth of educated talent in place, with plenty more experienced expats keen to return home, a regulatory system that is generally first class, and passably sound infrastructure (NBNCo notwithstanding).

The key will be the Government's role, and those who know Hedge Clipping's views will not be surprised that this is where potential and reality can come unstuck. The government - of whichever persuasion - needs to put the correct tax, structural and regulatory policies in place to ensure the framework is created to allow Australia to compete in the Asian, and global financial marketplace.

In the next week or so David Murray's Financial System Inquiry (FSI) report is due to be released. We can only hope that this government grasps that opportunity, and not waste it in the way the previous Henry Tax Review, or Mark Johnson's 2009 report were squandered.

Specific results received this week include the following PERFORMANCE UPDATES:

The Auscap Long Short Australian Equities Fund recorded a return of 2.25% in October with the annual return 29.93% and a volatility of 6.95%.

Alpha Beta Asian Fund returned -0.51% during October with annualised performance since inception of 7.58% with volatility of 5.24%.

The Aurora Fortitude Absolute Return Fund returned -0.29% during October bringing annualised performance since inception to 7.55%.

Allard Investment Fund recorded a performance of 0.60% during October bringing the annual return to 13.30%.

FUND REVIEWS released this week, all with the potential for earning CPD points:

Microequities Deep Value Microcap Fund; Bennelong Kardinia Absolute Return Fund; Supervised High Yield Fund

Best wishes for a happy and healthy weekend,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy.  For more information visit www.cpresearch.org.au or contact me by email.

INVESTMENT ADMINISTRATION CONFERENCE

Efficiency in a Regulated World

18 February 2015, Ivy Ballroom Sydney

This industry-leading event will bring together those shaping the future of investment fund administration in Australia to explore the key issues defining investment operations over the next five years.

The event will showcase the latest developments in efficiency, technology, strategy, reporting, processes, compliance and custodian relationships, with a focus on reducing costs and increasing returns for your fund.

This is a must attend for chief executive officers, chief operating officers, and senior operations staff from superannuation funds, funds managers, custodians and other providers.

Key issues to be examined include:

View the full AGENDA and REGISTER before 15 December 2014 for early bird pricing.

For further information regarding registration please contact Elena Chatz, Conference Operations Manager.

ATTACHED FILESEfficiency in a Regulated World (pdf format)

• The Fund is long biased, research driven, active equity long/short strategy investing in listed ASX companies with an eight year track record. 

• The Fund has significantly outperformed the ASX200 Accumulation Index since its inception in April 2006 and also has significantly lower risk KPI's. The Bennelong Kardinia Absolute Return Fund returned 1.22% in October and has volatility of 7.52% pa, compared to the ASX200 Accumulation's 14.31%.

• The Fund also has a strong focus on capital protection in negative markets. Portfolio Managers Mark Burgess and Kristiaan Rehder have significant market experience, while the Bennelong Group provide infrastructure, operational, compliance and distribution capabilities.

ATTACHED FILESBennelong Long Short Equity Fund AFM Review - Oct 2014 (pdf format)